Natural capital market place must be attractive to farmers

A NEW report, Natural Capital: what farmers and policy makers need to know, seeks to understand how new and emerging markets in natural capital fit into a changing landscape for farmers.

In the last month alone, reports from Green Finance Institute and Bankers for Net Zero have explored how private finance could help farmers to sequester carbon, create wildlife areas and deliver other important environmental value. But despite the urgent need to invest in more sustainable farming to deliver the necessary climate and environmental actions, there is not yet enough practical action on the ground from farmers, landowners and land managers commensurate with the scale of the challenge.

The Natural Capital report was commissioned by the Food Farming and Countryside Commission (FFCC) and written by Prof Fergus Lyon and Dr Amy Burnett of Middlesex University. It was supported by the Prince’s Countryside Fund.

A working paper from FFCC accompanies the report and further explores what role governments should play in shaping and enabling these markets to achieve substantial and speedy action towards climate goals and nature recovery. It shows that the UK government is missing an opportunity for global leadership by failing to make natural markets appealing to farmers.

Earlier in April the Westminster Government published the Nature Markets Framework. The FFCC says that the Framework is welcome, in terms of setting standards and clarifying how public and private money can work together, but that it doesn’t go far enough.

FFCC’s Chief Executive, Sue Pritchard, said “Clear commitments and regulation could establish a global role for British governments’ leadership and ensure all UK farmers have fair access to these emerging markets.”

The report says that the government’s framework “does not sufficiently recognise the underlying structural imbalance between powerful and experienced international markets players and individual farmers.” The report shows that many farmers perceive an unequal distribution of risks and rewards across current supply chains and feel unable to risk losing further control in their markets when they are already in a weak position as price takers for global commodities.

The FFCC is concerned that the potential of natural capital markets is being held back by lack of clarity about what public and private finance can each do, within a coherent and aligned government vision.

Sue Pritchard says “Nature markets can still be a vital future element of UK farming systems – if they can be made to work. Good, clear, mission-led regulation could kickstart natural capital markets, giving farmers confidence to optimise the potential of private funds, and to build climate action and nature recovery into their business plans. This could establish the UK as a global leader in these policy discussions.

“This report is a timely analysis of why farmers are not engaging with natural capital markets – and how this, in turn, is hampering development of these markets.  It highlights the urgent need for government to put in place the necessary guardrails to ensure Natural Capital markets can develop in a fair and balanced way.

Key findings at a glance:

  • Without good regulation, many farmers consider the risks of getting involved are too high and this is hampering the growth of the market.
  • Governments must put in place the necessary guardrails and regulation to ensure natural capital markets balance public value benefits from private finance, alongside their public investments.
  • The recent Nature Markets Framework published by government is welcome in setting standards – but now we need regulation and firm commitments.
  • Done well, this is an opportunity to establish the UK as a global leader in developing good policy to shape this much talked about, but still emerging, market.


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